Why de minimis changes could be a big deal at the Budget

In summary

• Rising tariffs have seen de minimis exemptions from customs charges come under pressure in the EU and in the US, where they were partially suspended at the end of July  
• In the UK, new figures show de minimis imports grew by more than half in the last fiscal year  
• With the Chancellor under pressure to raise government revenues, they could be a target in the Autumn Budget 2025 
• It may not be the quick win the Chancellor needs, however 

A Sky News investigation at the end of July has revealed the scale of low-value imports, often from Chinese retail businesses, benefiting from de minimis exemptions from customs duties. According to HMRC data, the trade value of de minimis imports was £5.9 billion in the fiscal year ending April 2025 – up 53% from the previous year.  

With the UK government struggling to meet its fiscal rules and struggling to cut spending, could the exemption be in the crosshairs at the forthcoming Budget?  

De minimis exemptions mean that international exporters are not subject to duties that would otherwise apply to low-value packages. In the UK, it means buyers can import goods valued at under £135 without any customs charges, aiding the rise of cheap Chinese export businesses like Temu and Shein.  

As the popularity of such businesses has grown, calls by domestic retailers to remove the exemptions have grown. In the US, Trump last week signed an executive order ending its de minimis exemption for imports from countries other than China. He had already ended the exemption for Chinese exporters in May. In the EU, the Commission’s proposals for reforming the customs union, published back in May 2023, also included eliminating it.  

The UK government, too, is considering action. It announced in April that it would review the exemption – a move welcomed by British retailers, who’ve long complained that it gives low-cost international online sellers an unfair advantage. British retailers have been lobbying for the change “for a very, very long time”, the Dragons’ Den star and retail group head Theo Paphitis told the BBC’s Today programme.  

The British Retail Consortium strongly welcomed the review, saying it showed “that the government has listened to the concerns and representations of retailers”. 

Given all this, reducing or eliminating the de minimis exemption in the Autumn Budget may seem an obvious move, particularly following the US’s example. The Chancellor will have a few issues to consider, though.  

The first is that the impact in terms of revenues is likely to be much less in the UK than in the US. The UK’s £135 de minimis exemption is similar to the €150 in the EU, but less than a quarter of the $800 in the US.  

Sky’s analysis points out that a notional 20% tariff on de minimis imports last fiscal year would have raised more than £1bn, almost making up for the U-turn on savings from the winter fuel allowance.  

However, in the UK third country duties on clothing are usually 12%, rather than 20%. Moreover, the £1bn calculation crucially, and almost certainly unrealistically, assumes that tariffs wouldn’t change consumer behaviour. In reality, the added costs would be likely to raise the prices of such retailers and reduce UK consumers’ demand.  

Of course, shifting demand to UK-based retailers might boost Treasury revenues, but it’s not a straightforward calculation. As Sky’s article also points out, the growth of Chinese retailers has been central to helping regional airports bounce back from Covid. The Federation of Small Businesses has also warned of the potential for the exemption’s elimination to push up prices.  

After falling capital gains tax receipts and reductions in staffing following the rise in employers’ NI, the decision on the de minimis exemption may not be so straightforward after all. At the very least, the Chancellor is likely to be aware that it’s not just her fiscal rules she needs to keep in mind. She also has to be aware of the law of unintended consequences.

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